CFTC Proposes Comprehensive Framework for Public-Interest Review of Event Contracts

The Commodity Futures Trading Commission (CFTC or Commission) issued a Notice of Proposed Rulemaking (NPRM) on June 10, 2026, titled "Prediction Markets; Public Interest Determinations" that would amend the CFTC's regulations to clarify how the Commission can determine whether certain event contracts listed by CFTC-registered exchanges are contrary to the public interest under the Commodity Exchange Act (CEA) and, therefore, prohibit their listing on those exchanges.

The proposal, published in the Federal Register on June 12, 2026, responds to the growth of prediction markets, which exceeded $25 billion in total trading volume across CFTC‑registered platforms in 2025, and is intended to provide clearer and more predictable review standards.

Background

Prediction markets list event contracts, often with binary payoffs, based on whether an underlying event will occur. Those events can range from sports outcomes, elections and economic indicators to awards or entertainment contests.

"Will the Knicks win Game 5 of the NBA finals" where market participants can buy "yes" or "no" contracts is an example of an event contract.

The CFTC generally regulates event contracts as swaps, which means retail customers can trade event contracts on only CFTC-registered exchanges, while eligible contract participants (generally institutional investors or wholesale customers) can trade them on exchange or over the counter.

Lawmakers in the U.S. congress aimed to address certain potential public-interest, market-integrity and regulatory concerns created by event contracts in 2010 in the Dodd-Frank Wall Street Reform and Consumer Protection Act by adding CEA Section 5c(c)(5)(C), the "Special Rule," which allows the CFTC to determine that certain event contracts are contrary to the public interest and prohibit exchanges from listing those contracts.

Public scrutiny of prediction markets has included event contracts tied to sensitive or high-risk events. In early March 2026, a global prediction market pulled down an event contract asking whether a nuclear weapon would be detonated, which had drawn nearly $850,000 in trades, and, in April, the company removed an event contract tied to the rescue of U.S. airmen whose jet was shot down over Iran after lawmakers criticized the site for reducing an active military operation to a financial trade.

Since adopting Dodd-Frank implementing regulations in 2011, the Commission has considered event contracts in several contexts, including event contracts tied to election outcomes. The CFTC also issued a proposed rule on the application of the Special Rule in 2024 that it later withdrew, along with an Advance NPRM earlier this year that drew approximately 3,500 comments. The current NPRM builds on that history, prior public input, and recent litigation addressing the scope of the Special Rule.

The NPRM also provides examples of event contracts that the Commission believes would generally fall outside the scope of the Special Rule entirely, including contracts based on:

• economic indicators, including consumer price index (CPI), gross domestic product (GDP), unemployment rate or trade deficits
• financial indicators, including federal funds rate, mortgage rates or stock indexes
• foreign exchange rates, political election or activity results
• outcomes of honor or award contests

3-Step Analytical Framework

The Commission proposes that the Special Rule requires a sequential three-step inquiry that must occur before the CFTC prohibits listing of an event contract:

1. Event Contract Determination. The CFTC would first consider whether the product at issue is an "event contract." This involves consideration of whether the contract is "based upon the occurrence, extent of an occurrence, or contingency associated with a potential financial, economic, or commercial consequence."
2. Enumerated Activity. If the contract is an event contract, the CFTC would then analyze whether the contract "involves" an enumerated activity under the Special Rule. Enumerated Activities include an activity that is unlawful under any federal or state law, terrorism, assassination, war, gaming or other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest.
   
   The NPRM proposes that an event contract "involves" an Enumerated Activity if the contract's settlement is determined by an occurrence in that activity, the extent of an occurrence in that activity, or a contingency associated with that activity – not whether trading the contract resembles wagering or has some other incidental connection to an Enumerated Activity.
   
   If the event contract involves an enumerated activity, the CFTC may then determine that it is contrary to the public interest. In other words, the CFTC does not interpret the statute to provide that event contracts involving enumerated activities are always contrary to the public interest; rather, if event contracts "involve" an enumerated activity, the CFTC "may determine" they are contrary to the public interest and prohibit their listing. The proposal would also authorize the Commission to identify, by future rule or regulation, additional activities similar to the enumerated activities in the CEA. The NPRM does not propose to identify any similar activity at this time.
   
   As Holland & Knight discussed in May 2026, the overlap between the regulation of event contracts and regulation of gaming is the subject of much ongoing litigation. The NPRM briefly addresses the scope of each of the enumerated activities other than gaming. The NPRM also provides a definition of gaming and a robust discussion of what constitutes gaming, both of which are touched on below.

3. Public-Interest Factors. If an event contract involves an enumerated activity, the CFTC would ask whether, applying the general factors and activity‑specific factors, where applicable, the contract is contrary to the public interest. The CFTC would weigh each factor on balance, and no single factor would be dispositive.

General Factors

Price Discovery and Information Aggregation Utility: The Commission would weigh whether the contract provides meaningful hedging, price-basing or commercially useful information while viewing contracts based on random outcomes or information concentrated outside the broader market as more likely contrary to the public interest because they would lack the potential to inform economic, commercial or financial decisions.

Market Integrity Threats: The Commission would focus on manipulation, market disruption, settlement integrity, misuse of nonpublic information, and whether settlement criteria are clear, objective, publicly verifiable and supported by suitable data and dispute‑resolution processes. The CFTC would look more closely at contracts involving national security, terrorism, assassination or war.

Compliance and Self-Regulatory Challenges: The Commission would evaluate whether the listing exchange can adequately administer the contracts, including surveillance capabilities, settlement procedures, dispute resolution, customer identification and safeguards against misuse of nonpublic information.

Enumerated Activity-Specific Factors

Unlawful Activity: For contracts involving unlawful activity under federal or state law, the Commission would consider surveys of relevant law, discrepancies among state laws, judicial precedent, whether relevant prohibitions are archaic or unenforced, and whether the activity is generally recognized as causing or posing public harm.

Terrorism, Assassination and War: The CFTC proposes that contracts that involve terrorism, assassination and war are "highly likely" to be found contrary to the public interest based on national security risks, insider-information constraints, settlement uncertainty in the "fog of war," perverse incentive effects and the principle that persons with relevant information should report to authorities rather than trade.

Contracts must be drafted so that settlement cannot be achieved through terrorism, assassination or war. An event contract drafted at a level of generality that permits settlement on the basis of one of those activities is treated as involving that activity. For example, the CFTC notes that an event contract that settles on whether a certain organization outside the U.S. conducts an armed attack causing more than 10 civilian deaths in a certain location during a certain month involves terrorism within the meaning of the Special Rule, but an event contract that settles on whether the Transportation Security Administration implements enhanced screening procedures at certain airports does not involve terrorism, because the settlement-determining occurrence is a governmental administrative action, which is a lawful exercise of agency authority.

Gaming: The CFTC proposes to define "gaming" as "any activity that: (i) one or more participants typically engage in for recreation or to entertain others; (ii) is governed by rules; and (iii) includes measurable occurrences or outcomes that depend on the participants' luck, skill, or athletic ability during the activity." The NPRM distinguishes "games" from contests such as elections and award ceremonies, which are not encompassed by the proposed definition. The NPRM also presents an alternative definition of "gaming" for comment, grounded in structural features that distinguish games from other activities. Under the alternative definition, "gaming" would mean "an activity created by its rules, in which (1) all participants whose conduct determines the outcome operate within the activity itself, and (2) those participants, in their capacity as participants, have purposes that are defined by and internal to the activity itself." Commenters may address either or both formulations.

The proposal distinguishes gaming subcategories:

• Games of random chance are identified as likely contrary to the public interest.
• Aggregate sports outcomes, including final scores, point differentials, win-loss results, tournament advancement, statistical performance and season-long metrics – might not be contrary to the public interest if they are supported by objective, verifiable data and integrity infrastructure. The CFTC also proposes reviewing sport-level integrity infrastructure and information-sharing or coordination agreements with leagues or governing bodies when considering whether to prohibit listing of a sports‑related event contract. The NPRM cautions that this approach is not a safe harbor and does not replace factor-by-factor public-interest review.
• Contracts based on player injuries, officiating-only outcomes, limited-control or discrete outcomes, altercations or pre-collegiate sports are identified as likely contrary to the public interest.

Review Process and Timeline

The NPRM would revise and formalize the existing 90-day review process for event contracts that may involve enumerated activities and raise public-interest concerns, with key procedural features:

• Initiation and Scope. The Commission may commence review by written determination no later than 10 days after listing. The CFTC must identify the submission, enumerated activity, contract terms and review factors and may consolidate substantially similar reviews. The Commission also may request suspension during review, though prediction markets are not required to comply with the CFTC's request.
• Milestones and Exchange Participation. The 90-day period begins when the CFTC provides its written determination. The CTFC's Division of Market Oversight (DMO) would issue concerns by day 15, the exchange may respond by day 30, DMO may recommend action by day 60, and the exchange may respond by day 70.
• Outcome and Order. By day 90, the Commission must issue an order finding the contract contrary to the public interest. If the Commission does not issue an order by the end of the review period, or if 100 days have passed since listing and any extension has concluded, the contract may be listed or continue to be listed, and the review is deemed concluded.
• Order Requirements. CFTC orders must include written findings addressing the factors relied upon, factors for and against listing and explain consistency with comparable prior determinations or provide reasons for any departure.

Practical Implications and Comment Opportunities

• Contract design will matter. The NPRM explains that a facially neutral contract can still involve terrorism, assassination or war if settlement can be satisfied through one of those pathways, unless the contract terms specify qualifying settlement pathways with enough detail to exclude the Enumerated Activity pathway.
• The NPRM expressly recognizes the Indian Gaming Regulatory Act framework, Tribal-State compacts for Class III gaming, the importance of gaming revenue to Tribal governments, and federal interest in Tribal gaming as a means of promoting Tribal economic development and self-sufficiency. Although the Commission states that the proposal concerns event contracts traded as swaps or futures contracts subject to the CFTC's exclusive jurisdiction, it invites Tribal governments and other interested parties to comment on aspects of the proposal that may affect Tribal governmental, economic or regulatory interests.
• Stakeholders may wish to consider commenting on the proposed definition of "gaming," including the alternative structural definition of gaming, as well as the treatment of game shows, reality competitions, pageants, music and talent competitions or other concepts.

What's Next

The NPRM represents an effort by the CFTC to establish clearer standards for the jurisdiction it is asserting over the rapidly growing prediction market industry. Established casino, commercial and governmental interests, as well as prediction market participants, CFTC-registered exchanges and retail and institutional investors, should carefully evaluate how the NPRM's framework may impact event contracts, prediction markets, and casino, hospitality and entertainment venue sectors, particularly the new definition of "gaming" and public-interest factors. The 90-day review process and public-interest factors will shape contract design and listing decisions going forward. Comments are due by July 27, 2026, and the rule encourages comments by stakeholders on a variety of topics to help shape the final rule.

The authors, who include members of Holland & Knight's Gaming, derivatives and commodities regulatory, and Tribal law teams, are well suited to provide advice regarding this NPRM, prediction market regulation and CFTC regulatory matters, and related gaming, Tribal, sports integrity and compliance considerations.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.